Hospitals Are Surviving the Recession

By November 16, 2009Commentary

Two reports reflect on the financial state of hospitals.  Health care facilities were not immune from the effects of the recession, which impacted not only revenues but investment portfolios and ability to secure debt financing.  Thomson Reuters’ Center for HealthCare Improvement issued an updated look at hospitals’ financial condition.  (Thomson Hospital Report) Thomson found that in the second quarter operating margins improved, particularly at major teaching hospitals.  Revenue is increasing again and labor expenses were declining, primarily because of lower length of stays, which enhance labor productivity.   Days cash on hand improved significantly.  Case mix trended upward, but Thomson believes this may be attributed to CMS’ adoption of the MS-DRG system.  It did not see clear evidence of elective procedures being deferred.

The American Hospital Association report was gloomier.  It noted that there are more patients in hospital emergency rooms without insurance, more patients overall who are unable to pay for their care and fewer patients seeking inpatient and elective services.  It also found that more than half of hospitals have reduced staff and 80% have cut administrative expenses in some manner.  AHA said a third of hospitals expected to lose money in the first half of 2009.  About half of hospitals reported that it was harder to access various sources of capital.  Seventy percent have cut capital spending.

The differences in the reports may partly be that AHA’s data is purely based on survey responses to questions, whereas Thomson was relying on a proprietary database of actual hospital information. There are time period differences in some of the measures each group was examining.  In addition, the AHA, in its role as an advocate for hospitals on issues such as reimbursement, probably has little incentive to paint a picture of robust financial health.  It may not be a bad thing if the recession has forced hospitals to pay closer attention to expense reduction and productivity gains, but whether those will be retained as the recession ends is unclear.  Hospitals will ultimately need to become more efficient if hospital prices and spending on hospital care is to trend downward or at least upward at a slower rate.

(AHA Report)

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